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I'm sorry to hear about your situation. Unfortunately this is an all-too-common situation in a co-signing situation, where you incur financial liability on behalf of another individual. I know it's a little too late, but I always advise individuals to avoid, if possible, co-signing anything, and only co-sign if you're willing to be completely liable for the loan. You would be surprised how many individuals come to this site asking questions with a situation similar to yours.
The entire point of a co-signing situation is that you attach your credit and good name to another, so that the lender will make a loan. The contract between the lender and the co-signer / guarantor for payment is almost certainly going to be enforceable, but there's also a contract (either express or implied) between the co-signer and the co-signee (the beneficiary of the co-sign agreement). That contract states that the co-signee will make payments on time and do other actions consistent with good faith and fair dealing.
Furthermore, in your situation, it seems that you have a contract (although the enforceability is a bit unclear) with your sister, in that she made a guarantee to you that if anything happens, she;ll take care of it.
In short, yes, you can sue both of them for expenses you've incurred. You can sue your niece for breach of contract (because of that implied contract) as well as for "contribution" (the legal term for when you pay something that she's directly liable for, you can go after her in court for reimbursement). Again, you are legally liable to pay those expenses to the lender as well as to the government (for the tickets), but since your niece is primarily liable, with you being secondarily liable, you can seek reimbursement from her in court.
You can also sue your sister for brecah of contract, in that she induced you to sign with the representation that she would make everything right if there was a breach.
You should first, however, send a demand letter before escalating legal action. Send a demand letter demanding payment of your damages within 30 days, otherwise you will pursue legal action against them, seeking that amount plus any additional damages as allowed by law. Send this letter certified, return receipt requested, as well as a copy sent regular mail. Keep a copy for yourself, as well as the return receipt number so that you can show the court that you made a demand for the unpaid amount.
Do a search on the web for her county and "small claims court." You should find either a website or phone number to the small claims clerk. Ask them what you need to do to bring such a lawsuit. The small claims clerk will give you guidance on how to file this suit and how to get the other party served with notice. You will receive a hearing date, at which you should present your evidence and ask for a judgment for the amount that you paid and should be reimbursed.
Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!
thank you for your help